Gotta Know When to Hold 'Em
Patrick.net had an interesting post today regarding the reluctance of banks to get homes off their books despite rapidly depreciating values. Doesn't seem worth it to bleed carrying costs and diminished value each month.
It's to the point where if I see a listing that's a short sale or bank-owned, I won't so much as give it a second thought. I mean, what's the point? Sit around for weeks and wait for an overwhelmed, overworked bank rep to finally return your call only to reject your fair-market offer?
Hell, by that time the median home price will have lopped off another 1 to 2%.
Anyhow, Patrick provides an explanation that makes sense to me.
One answer is that if the banks were to really sell their foreclosures for what they’re worth in the open market, that would devalue the collateral they hold on all their other mortgages, rendering the banks instantly insolvent.
That pretty much nails it, no? Because of the likelihood a bank would have multiple mortgages in the same neighborhood--and quite possibly on the same street--it's in their best interest to ensure the comps aren't any lower than they need to be.
However, all it takes is one lender that's less confident about the prospects of a federal bailout to jump the gun, dump a property for market value--or below it--to cause a chain reaction.
Go read the link and the corresponding comments. Come back and let me know what you think. I'm curious about your thoughts.
It's to the point where if I see a listing that's a short sale or bank-owned, I won't so much as give it a second thought. I mean, what's the point? Sit around for weeks and wait for an overwhelmed, overworked bank rep to finally return your call only to reject your fair-market offer?
Hell, by that time the median home price will have lopped off another 1 to 2%.
Anyhow, Patrick provides an explanation that makes sense to me.
One answer is that if the banks were to really sell their foreclosures for what they’re worth in the open market, that would devalue the collateral they hold on all their other mortgages, rendering the banks instantly insolvent.
That pretty much nails it, no? Because of the likelihood a bank would have multiple mortgages in the same neighborhood--and quite possibly on the same street--it's in their best interest to ensure the comps aren't any lower than they need to be.
However, all it takes is one lender that's less confident about the prospects of a federal bailout to jump the gun, dump a property for market value--or below it--to cause a chain reaction.
Go read the link and the corresponding comments. Come back and let me know what you think. I'm curious about your thoughts.
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